Mary Lou McDonald (Dublin Central, Sinn Fein)
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86. To ask the Minister for Public Expenditure and Reform the implications for public spending of the expenditure benchmark that will apply as of 2016, as introduced by the six-pack European Semester provision, and incorporated into the fiscal stability treaty in 2012. [47949/14]

Mary Lou McDonald (Dublin Central, Sinn Fein)
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My question relates to the expenditure benchmark that will apply from 2016, as introduced by the six-pack European semester provision. Will the Minister explain in layman's or laywoman's terms what he understands the implication of that benchmark to be for government spending beyond 2016? Does he accept that the restrictions it will impose will render it impossible to spend sufficiently to ensure the delivery of full quality services? Does he anticipate that compliance with this benchmark will mean further cuts in future?

Brendan Howlin (Wexford, Labour)
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The key fiscal objective in budget 2015 is a general government deficit of 2.7% of GDP. Achieving this target will see Ireland exit the excessive deficit procedure. Thereafter fiscal policy will become subject to the preventative arm of the Stability and Growth Pact, SGP.

Each country has a medium-term budgetary objective, MTO, for its fiscal policy. For Ireland, the MTO is to achieve a budget balance in structural terms. Under the preventative arm of the SGP, a member state which has not yet reached its MTO is required to make sufficient progress towards its achievement every year. The expenditure benchmark is a complementary measure, designed to assist fiscal adjustment towards the MTO and to ensure that expenditure grows at sustainable levels thereafter. The arrangements will require that the growth in the level of spending is kept in line with the level of growth in the economy, while also ensuring that we progress towards our medium-term objective of achieving a balanced budget.

The constraints imposed by the SGP will require the continued prioritisation of expenditure to ensure that essential public services are effectively delivered. Choices will need to be made to ensure that funding continues to be directed to deliver education to our young people, provide essential social supports and health services and address emerging priorities such as meeting social housing needs. Protecting expenditure in these areas has been a key priority for the Government while implementing its structural consolidation. Sustainable growth in expenditure also requires that there is a continued focus on public service reform to increase productivity, deliver efficiencies and improve outcomes for service users.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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The Minister's response echoes a response that my colleague, Deputy Pearse Doherty, received from the Minister's twin Minister, Deputy Noonan, in which he stated that decisions on allocations from 2016 onwards must not only have due regard for the level of expenditure required to ensure effective delivery of key public services but also the fiscal parameters set out under the preventative arm of the Stability and Growth Pact. This is where the problem arises. The Minister has billed this chapter of the Government's term as the point at which we move beyond austerity and begin to see a social dividend and, presumably, an economic dividend. However, that has not come to pass. My concern is that the expenditure benchmark is pitched at a structural deficit level of 0.5%. The Minister will recall that in the course of a referendum campaign we had a hot and heavy debate as to whether that was a good idea for this State. We took the view that it was not.

Can the Minister tell us his understanding of the stringency of the requirement for a structural deficit of 0.5% of GDP? Is he seriously saying he does not believe it will have an impact and necessitate further cutbacks?

Brendan Howlin (Wexford, Labour)
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I understand the very important question the Deputy is asking. The calculation of the expenditure benchmark is subject to a number of key inputs including the GDP deflator and potential growth. The Department of Finance is engaging with the Commission to calculate a reasonable benchmark for Ireland. In the answer to the parliamentary question to which the Deputy referred, the Minister for Finance, Deputy Noonan, gave an indicative figure, but the figure is not fixed because the modality is still being debated, discussed and ironed out with Brussels. Personally, I take the view that a one-size-fits-all scenario is unsuitable because our growth capacity is much greater than that of the rest of the EU. The Department of Finance is working on these matters. This time last year, we expected to be required to make additional adjustments of €2 billion for the budget in 2015. The changed circumstances allowed us not to make those adjustments but to expend an additional €1 billion. That was a change of €3 billion over a year. I expect that ongoing negotiations will give a degree of flexibility in expenditure to meet the demands we have set as well as preserving prudence.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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Clearly, prudence is a desirable virtue when dealing with public expenditure. I agree with the Minister that the trick is to invest sufficiently and to kick-start growth so that we move from a vicious cycle of austerity to a virtuous cycle of investment and return, socially and for the Exchequer in terms of tax returns. The Minister said a conversation was ongoing between the Department of Finance and the European Commission. What is the Minister’s understanding of the expenditure benchmark? Does he regard it as a binding rule or a general guideline? I could not agree more that a one-size-fits-all approach would be bad news for Ireland. I suggest that the Minister take the latter interpretation that this is a guideline rather than a binding imposition on the State. Is this the Minister's view?

Brendan Howlin (Wexford, Labour)
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The Stability and Growth Pact is binding on us, as it is on every eurozone country, and is designed to ensure fiscal policies are sustainable into the future and prevent economic collapse due to our being profligate at any time in our electoral or economic cycle. The estimates provided in the answer to the parliamentary question are technical and will change and evolve as potential growth rates and GDP become clearer. The negotiation will have to be agreed with the Commission, and the work is ongoing. I agree with the Deputy that we need an economic and social dividend to allay the hardships the Irish people have endured over recent years. Now that we have built economic sustainability, we need the product of it to manifest itself in people's lives. While it will be slow and steady, it will be clear. I have always believed in stimulating the economy, and this is why, two years ago, I introduced a €2.25 billion stimulus programme. Early in the new year, I will bring the new five-year multi-annual capital plan before the Dáil, which will be part of the stimulus that will do the very thing the Deputy has indicated should be done.